Commentary: Greater mortgage transparency needed, not stress tests

Commentary: Greater mortgage transparency needed, not stress tests

Commentary: Greater mortgage transparency needed, not stress tests

What Canadian consumers need the most right now is greater transparency in the alternative mortgage sector, and not more stress tests, according to Neighbourhood Holdings CEO Taylor Little.

“A better approach to increasing the regulation of alternative lenders is to promote transparency through existing regulatory frameworks that apply to alternative lenders, such as provincial mortgage broker acts, securities acts, consumer protection acts and others,” Little wrote in his recent contribution to the Vancouver Sun.

“As the industry evolves and the role of alternative lenders becomes more institutionalized, we should recognize that they serve as a backstop for borrowers that no longer meet today’s conventional mortgage criteria.”

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Little – whose company offers private first mortgages in B.C., Ontario, Quebec, Alberta, and Manitoba – argued that while the tighter mortgage qualification requirements introduced by B-20 early last year might have been implemented with the noble intention of “protecting Canadians from taking on more debt than they could handle,” these have led to some serious unintended consequences.

“Since its imposition, Vancouver and Toronto’s previously hot housing markets have cooled significantly,” Little stated. “The number and purchasing power of market participants has diminished as a result of the stress test that was applied over a year ago.”

“If alternative lenders, too, were subjected to the same test today, prospective homebuyers would be the first to feel the pinch.”

Little concluded that the alternative sector’s responsibility is to foment a culture of transparency, as these lenders are often the only recourse of Canadians struggling for options “at a time when it has never been more difficult to obtain a bank mortgage.”